State Sector and Crown Entities Reform Bill

I move, That the State Sector and Crown Entities Reform Bill be now read a second time.

I’d like to acknowledge the members of the Governance and Administration Committee for their work on the bill, the very constructive recommendations they have made for amendment—which I will speak about in a few moments—and for the collegial way that they have approached the debates on this particular matter.

First of all, let me say that there’s much about the New Zealand State sector and State services that works very well. Crown entities are an integral part of our system of public services, and, for citizens, they’re often the public face of Government—the agencies that they interact with most often. Collectively, they carry out a very wide range of functions, from running public hospitals and schools to performing a broad range of other services and regulatory activities. Given the wide variety and the individual autonomy of the Crown entities, it’s important that they remain connected to the core values and unifying spirit of service that the Public Service is required to have.

There are discrete areas where better alignment with other aspects of the Public Service can help to maintain confidence and build trust in the Crown entities as public agencies without affecting the autonomy of Crown entities’ statutory functions. The changes proposed in this bill support greater integrity and accountability in the management of State services. The amendments cover four interrelated dimensions, primarily in the Crown entities sector, with each amendment bringing a part of the State sector into better alignment and consistency with the arrangements that already exist across the Public Service.

So, to recap, Part 1 of the bill addresses the Crown Entities Act 2004. The changes focus on two key things: they will require boards of statutory Crown entities to obtain the written consent from the State Services Commissioner to the terms and conditions of a chief executive’s employment, and they will introduce a term of up to five years—which can be renewed—for future chief executives of statutory Crown entities. This basically brings the terms and conditions of Crown entity chief executives into line with the terms and conditions of chief executives in the core Public Service.

Part 2 of the bill addresses the State Sector Act 1988. Again, the changes in this part of the bill focus on two key areas. They provide explicitly for the State Services Commissioner to set standards of integrity and conduct by applying a code of conduct to boards of Crown entities, and the second is that they improve the investigation powers of the State Services Commissioner by modernising them under the provisions of the Inquiries Act 2013 and providing a more uniform trigger to the exercise of the commissioner’s powers.

The bill was first introduced in February, and it has been considered by the Governance and Administration Committee. I want to, again, thank them for their work. I understand that seven submissions were made on the bill. It is, clearly, not one of the more controversial pieces of legislation that has been before the House, but I do acknowledge the committee has made some helpful recommendations to improve the bill as a result of those submissions.

In relation to Part 1, the most significant amendment that the committee has made—which the Government certainly endorses—is an amendment that would insert new criteria that the State Services Commissioner would need to have regard to in consenting to chief executive terms and conditions. Those criteria include the legal, commercial, and operational context of the entity and any information provided by the board, the public nature of the entity and the related public interest and prudent stewardship of public resources, relevant market information, Government expectations, and other relevant factors. I think this is a very sensible amendment, and it is one that the Government endorses.

With regard to Part 2 of the bill—these are the changes relating to the State Sector Act—the committee has recommended six amendments, mainly to provide greater clarity and consistency between the new provisions in the State Sector Act and related legislation. The first four amendments deal with replacing the State Services Commissioner’s powers of inquiry and investigations. These powers, I was interested to know when we started discussing this bill at the very beginning—or started discussing the concept of the bill—are still rooted in the Commissions of Inquiry Act from 1908. In fact, the Parliament has subsequently passed, in 2013, the Inquiries Act, which provides a much more modern context for inquiries and a much more, I think, streamlined set of inquiry powers, and grades of inquiry that are much more sensible and fit for purpose in the modern context. Therefore, bringing the State Services Commissioner’s inquiry powers into line with those new powers in the Inquiries Act of 2013 is very sensible.

So the bill as introduced could be described as somewhat conservative in the range of provisions from the Inquiries Act that were proposed to be included in the State Sector Act. I’m told that the New Zealand Law Society commented that detailed safeguards introduced by the Inquiries Act should also apply, and the bill as reported back includes additional provisions from the Inquiries Act relating to the duty of the inquiry to act independently, impartially, and fairly, the ability of an inquiry to designate core participants, and the ability of an inquiry to refer questions of law to the High Court. These are all very sound amendments that the Government endorses. Another useful amendment ensures that a delegation under the Inquiries Act must be carried out in accordance with the relevant section of the State Sector Act. Consistency between the operation of those Acts is, clearly, desirable.

The bill reported back from select committee clarifies that inquiries by the commissioner have the same exemption as inquiries under the Inquiries Act in relation to Privacy Act principles. This is very important, and it is one that has been recently highlighted, where an inquiry can only really be effective if people are free and frank with the inquiry. If they’re sharing evidence with the inquiry that is of a sensitive nature which they then know is going to be passed on, it may inhibit the inquiry from being able to get hold of that evidence in the first place. So there is a real tension here between the Privacy Act and the ability to carry out an inquiry. The Inquiries Act strikes the right balance, and the intention here is ensure that that balance is also carried through into the State Services Commissioner’s powers.

So I’m not going to speak in great detail about that, but I think that the amendments that have been put forward by the committee around the powers of the commissioner to conduct inquiries are sensible ones and provide further safeguards on the use of that power in line with the powers that would be conferred under the Inquiries Act. So I want to, again, thank the committee for their work in bringing this bill back to the House, making judicious amendments to the bill, and bringing it back, I hope, in a position—I note that the committee’s report was unanimous and I hope that the bill has been reported back in a way that the House can also have unanimous support for it. Thank you.

Thank you for the opportunity to speak on the second reading and report back by the Governance and Administration Committee on the State Sector and Crown Entities Reform Bill. National will be supporting the bill. I want to join with Minister Hipkins in thanking the chair Brett Hudson and the members of the committee for the work that has gone into this bill. I want to make some comments about the specific provisions in the bill and also in the broader context of New Zealand’s State sector and reform.

The first change in this bill is in respect of the setting of salaries of chief executives of Crown entities and a tension that exists between getting the best people for the job and, on the other hand, making sure that we get best value for money for the taxpayer.

There is a bit of a debate around the extent to which the all-powerful State Services Commission is able to override the judgments that are made by boards of significant Crown entities, whether we look at the New Zealand Superannuation Fund or ACC or other entities. From National’s point of view, we want the best person for the job. While we can have a pretty low-level argument sort of driven by the politics of envy about the salaries that are paid, when you’re dealing with an entity like the New Zealand Superannuation Fund—with $30 billion worth of assets—or with ACC, National wants first-class governance and management of those organisations, because that is what is in the best interests of New Zealand and the taxpayer.

Now, we do want to ensure that the elected Government of the day has some control, so that is why we are not unsupportive of the changes. We would prefer to have gone a little further than where the select committee has, and I commend the select committee on putting a bit more constraint and criteria about the State Services Commissioner’s role in that. We believe it should have been a statutory criteria, and we may move some amendments in the committee stage on that note.

There is also the intention in this bill to more broadly extend codes of practice around the conduct of not just members of the Public Service but those people that serve on boards of our Crown entities. We’re supportive of that. In respect of the Inquiries Act, we’re proud of our work as a Government on the 2014 Inquiries Act. It is a big improvement on the somewhat old and outdated 1905 Act. This State services bill updates the powers of the State Services Commissioner to be able to better interact with the Inquiries Act of 2014.

Now, one of the issues that the select committee grappled with was the issue of the Privacy Act and how that interacts with the State Services Commissioner when they’re doing some inquiry of some wrongdoing that’s gone on within one of the thousands of Crown entities. The only constraint that National would want to note on that issue of the interaction of this bill and the Privacy Act is to be careful that we do not set one set of rules for the public sector and a different set of rules for the private sector.

Parliament is so good at saying that if it’s a State Services Commissioner and they’re doing an inquiry into one of the Crown entities, they should be able to override the Privacy Commissioner to be able to identify wrongdoing. Why should that not equally apply to a private company or entity outside the State sector? That is really a cautionary note, whether it is the Privacy Act or others, to make sure that we have practical laws that are going to work in both sectors. I’m always cautious as a parliamentarian when we’re saying “Actually, there are exceptions to the Privacy Act for the State Services Commissioner because there are special circumstances for it.”, when, actually, there are large private sector entities that have exactly the same issues in respect of wrongdoing and their powers to be able to inquire.

This is a relative minor bill and I do want to put it in the context more broadly of changes that are going on in the State sector. It is entirely appropriate that Parliament this morning is pretending that it’s yesterday, because there is much which the Government is doing in the area of State sector reform that reminds me of yesterday—that is, if we come to the issue of ensuring that our public sector is accountable and performance-orientated. The truth is this Government is taking us backwards. We have seen an announcement from the Minister that he’s going to remove any at-risk component of State sector chief executives. This is that classic left-wing notion that if we just pay everybody the same, somehow that will result in us getting ahead as a country. National makes no apologies for being a party that wants to reward those that make the effort and those that deliver performance.

It was particularly ironic that when Chris Hipkins, the Minister of State Services, announced, with a great deal of fanfare, changes to the employment arrangements of our chief executives, he just happened to forget that he was giving every one of our chief executives an extra week’s holiday in a trade-off for other provisions. That was a bit cute and that was going backwards. I don’t know the justification for why the chief executives of our public sector entities should get any more holidays than the nurses, the doctors, the policemen, and the others that are doing the hard graft and that are at the core of our public services.

I also find it somewhat ironic that in this bill we are setting very tough standards and codes of ethics for boards of Crown entities. I would challenge the Government and say “Please apply to yourselves.”, because in so many instances we are seeing this gaping canyon between standards that this Government demands of others and what they are prepared to deliver themselves. Whether it be the Clare Curran episode with Radio New Zealand and Carol Hirschfeld, whether it be the issues of the appointment of the Chief Technology Officer, or whether it be the quite extraordinary comments that we saw at the beginning of the year from Minister Shane Jones—and I’m not going to repeat the phrase. I’m simply going to say that he wants the Public Service to be dominated by s-kickers and says that the politicians should be able to control it. He wants an American-style public sector where the politicians are able to appoint their political mates into senior positions in the Public Service—how that contrasts with the high-feeling objectives that are in this bill. Again, it highlights the huge gap that exists between the lofty goals that this Government aims for and what happens when it comes to practice.

It is our view that an independent, politically neutral State sector is absolutely critically to New Zealand’s ongoing success. When we have Ministers sitting down with a very sensitive organisation like Radio New Zealand and with Carol Hirschfeld, the head of news, that is breaching those standards, and the Minister of State Services has been strangely quiet. When you have the Minister for Regional Economic Development, Shane Jones, talking about the fact that the public sector are just asking awkward questions of his Provincial Growth Fund, and he wants to be able to install his political lackeys into distributing those billions of dollars of public funds, we will challenge the Minister of State Services and say that that is wrong.

Equally so, when we have the Government in an absolute pickle over the appointment of the Chief Technology Officer, we will challenge the Government too. This was an appointment that was meant to be made in February. This is an appointment where there is crass political interference in the State sector process. I will challenge the Minister and say, “How do the lofty goals and the code of ethics that you are proposing in this bill and wanting to impose on others”—how have we seen that conduct from those that are responsible for the appointment of the Chief Technology Officer for Government? Whether it is the Minister of State Services, whether it is the Minister for open Government, or whether it be the Prime Minister, who in the Cabinet paper were responsible for that appointment, we see a huge gap between the intent of this bill and the practice by this Government.

So there are some minor changes in this bill that National will support. They are not the be-all and the end-all of achieving a quality Public Service for New Zealand. We are more concerned about some of the broader reforms that the Government is doing in the State sector area that are taking away the incentives for performance and that are taking away the measures of that performance, because members on this side of the House want a strong and accountable public sector, politically neutral, that delivers results for Kiwi families.

Mōrena, Madam Deputy Speaker. It’s my pleasure to speak on this bill. Can I just acknowledge the Minister of State Services for the work that has gone into this, and also the Governance and Administration Committee chair and members here this morning, who have contributed to the process to date.

It is an omnibus bill with two parts. We’ve heard about Part 1, making key changes to the Crown Entities Act, and Part 2, making key changes to the State Sector Act. But, in summary, the bill makes three changes really in total: it replaces the use of the old Commissions of Inquiry Act 1908 with substantially similar powers from the Inquiries Act 2013, it provides a uniform trigger to enable the State Services Commissioner to use the full suite of investigation-type powers in the wider State services—all the commissioner’s powers will be available, irrespective of whether the commissioner is directed or requested to act by the Prime Minister or a Minister or the head of any part of the State Service—and, finally, it enables the commissioner to use the full suite of investigatory powers under the commissioner’s own motion for investigations into matters of integrity and accountability.

Integrity and accountability—I think this puts the “public” and “service” back into the Public Service.

I just wanted to comment on a few things that the member for Nelson has brought up in his speech. The best person for the job concept—this is a bill that reinforces that. It’s an absolute myth that if you pay more, you’ll get a better person, or more of a person. We see already, riddled through the last 20, 30, 40 years, many a chief executive who has come in, promised lots, and they are on their merry way. Their CV looks great, but I wonder truly whether they were “public” and “servants” in that private-public push-pull.

This is public money. If you wanted to make money and go do your thing, go join the private sector and have a happy life there, but when you’re in the Public Service, you are a public servant, and I think what we’ve seen from taxpayers, the people of New Zealand, is that it’s unacceptable—some of the salaries that are being paid. We’ve heard that. This addresses some of that. It gets some of the consistency in place that the Government intends to achieve.

There is that performance factor and that risk component there. But, again, we’re not a car factory. We’re not a tyre factory. If they want to sell more cars, more tyres, go work for the private sector and get your risk component built into your salary—end of story. You’re right—there is nothing cute here. This just really is about a better, more transparent, and accountable Public Service which, at the end of the day, gives public trust and confidence in the Government, and that’s what this bill aims to achieve. I commend this to the House.

I call—sorry, before I do that, I should actually say the question is that the motion be agreed to. I call Brett Hudson.

Well, good news—we’ll agree to it. It’s a pleasure to rise in support of the State Sector and Crown Entities Reform Bill in this second reading debate.

I’d just like to acknowledge the kind words that members have made in contributions to date about the work of the Governance and Administration Committee in scrutinising this bill. I’m almost motivated to seek leave to suspend the Standing Orders so that we can increase the number of calls that we can take on this bill. But I do thank them very much, acknowledging the work that the members do, and I would also acknowledge each of the members on the Governance and Administration Committee for the way that we have all approached not only this bill but also other bills that have been and are before us.

We support this bill, essentially, in full. As Dr Nick Smith has pointed out, there were some areas that we on the Opposition side would have liked to have seen a little different in the amendments that the committee proposed and reported back on—particularly, they are around CEO salaries and terms and conditions, and the State Services Commissioner’s pretty much unbridled role in setting those. Although we were able, through a discussion, to reach a consensus that there should be some criteria to which the State Services Commissioner must give regard if they choose to recommend or require something other than what the board of the entity is recommending, some of us, at least, felt that it would be better, and, particularly, from a true governance sense it would be better, for there to be objective criteria—thresholds, if you will—that must be met in order for the State Services Commissioner to do other than accept the recommendation from the board.

Ultimately, these entities we’re talking about have independent boards assigned to them. Just as in the private sector, if you have a board to govern the company, it is only right and proper that that board is not constrained by external influences other than, of course, those annual shareholder meetings, where shareholders can and do express their satisfaction or otherwise with those boards. We felt that it was important that we maintain very much a consistent approach to the governance of Crown entities: that they have an independent board—or have a board—and that that board should not have its powers and responsibilities and authority constrained unnecessarily. We would have preferred that there were objective thresholds that the commissioner would have to show had been met in order to do something other than what the board recommended, but we do acknowledge that we can go with a consensus, as the bill has been reported back, that the commissioner must at least give regard to those certain criteria.

I do note, as the previous speaker, Paul Eagle, pointed out when he talked about performance—and, of course, outside of this bill but very much related to the subject—that the Minister has changed salary settings for State sector chief executives to remove the performance element of their salaries that previously existed. They’re all getting most of that by default now; it’s the overachievement they won’t be able to get hold of. But, actually, I would argue that that runs very contrary to what the Government wants to achieve and which our Government, the previous Government, wanted to achieve, which is a State sector that is outcomes-focused—not inputs and not outputs, but outcomes-focused—and particularly where those outcomes span across more than just a single silo of a given entity or a given department or a given ministry. The ability to create incentives to chief executives through performance pay is a very, very powerful lever, particularly when it comes to working with others from outside of their ministry. So while it’s not part of this bill, I would urge the Minister to reconsider that decision. I think it actually operates contrary to the State sector outcomes approach that he’s looking to achieve.

On to the other parts of the bill, I was extremely pleased, actually, to see the auspices of inquiries through the commissioner to now be very much mirroring that of the Inquiries Act. We listened very closely not only to submissions but to officials, and we agreed strongly—particularly in the areas of certain suspension of privacy elements such as during an inquiry—to not compromise the work that is under way. While it does constrain certain other privileges and rights, it is, we felt, very appropriate to the nature of the inquiries to not compromise the integrity of the inquiry process that the commissioner may be undertaking. So look, although we have some elements we might like to have seen slightly different, there is no question that we do commend this bill to the House.

Kia ora anō tātou—Māori Language Week goes on. I want to just focus on three things. Obviously, we support this bill. Number one, it is a challenge to attract talent into the broader Civil Service when they feel that their prospects could be compromised if we are too constrictive in terms of their entitlements and opportunities to develop as senior executives, but the Public Service is called the Public Service for a reason. Inherent in the word “public” is the notion of “service”. We, after all, are public officials ourselves, and it pains me that the level of scrutiny that I, personally, have suffered from time to time does not seem to be equally shared by these grandees in the Civil Service. This is one of the reasons why I support this bill and our party supports this bill in giving the commissioner of the State sector greater powers to discipline the appetites that have grown out of control—certainly, over the last nine years.

I think at one level our experiment with the Civil Service, right back to Geoffrey Palmer when he introduced this notion of Darwinism—and that’s led to great pillars or silos—has actually gone too far. We’ve debated this, obviously, as politicians on our side of the House, and I’m glad to hear Mr Hudson say that, broadly speaking, they share our concerns. But it should be seen that there is an element of service that is not fully monetised when you take a role like a parliamentarian or a senior executive in the broader Civil Service. If you don’t like that, go and get another job. Go and work for Graeme Hart or Peter Talley and see how much money they are willing to pay you. Don’t come with an unrealistic set of expectations as to what is your worth. First, start from a sense of “What is the service that I’m prepared to develop and bring forward within my own ethical framework?” We feel very strongly about that.

Now, it might be said that we’re going to chase away talent from some of the more peripheral entities that comprise the Civil Service. Well, go away and work somewhere else. I think it’s high time that those of us—as parliamentarians we should stick up for that. We’ve come out of our private lives, into the culture and the code of public service. The people who execute our decisions or who challenge, from time to time, our decision making to ensure that it’s robust and compliant with the law—in my view, this is the new reality for that cadre of fellow travellers in the broader Civil Service.

The other point that I think is important for all of the parliamentarians, and that we most certainly support, is the ability for the State Services Commissioner (SSC)—let’s call him Mr Peter Hughes; he’s the current holder—to undertake inquiries that give him greater scope to uncover what has actually happened. Now, we have had—and just bear with me; I’m not going to stray too far off the script—obviously, a particularly colourful set of issues over the last six weeks, dealing with a senior police officer and the inquiries that have been engaged in in relation to how he got his job and who he might have yelled at and various other matters that, unfortunately, have been trivialised by the Opposition in the business of the House. But an inquiry ought to be based on natural justice. An inquiry should have the ability to cause people to tell the truth, certainly where information has been shared that has a direct impact not only on the ability of us to exercise our accountabilities as members of Parliament but also on the leaders of the State sector to root out elements that actually undermine the ability.

Now, I hear the last speaker, Brett Hudson. He talked about not going too far and about ensuring that not only you don’t make the inquiries process excessively expensive and cumbersome but we don’t trip up in terms of other processes that the State has in place. But this is an opportunity to tidy up a part of our governance culture that has been screaming out for attention. I’m sure I speak on behalf of a lot of the members in the House: I, personally, have had a gutsful of seeing the perquisites, the excessive emoluments, the excessive remuneration culture creep into the upper levels of our Civil Service at a time where it’s being inversely treated for us as parliamentarians. We should never forget that we are only a small body of people—120-odd—and there are thousands and thousands of fellow New Zealanders holding these roles, and I feel very strongly that this law should curb any expectation they have at the top of the tree for ever-rising remuneration packages. The sooner that we see the rear end of that type of personality in the Civil Service, the louder I will clap.

The final thing about this bill is that it’s something that we should all be joined in as parliamentarians. If we don’t build a law that improves accountability, who is going to do it? Are we going to rely on the media to do it? Are we going to rely on people using the powers of the judiciary and the court to do it? No. We should be passing legislation that enables us as parliamentarians to demonstrate in the pyramid of influence that we, the elected people of New Zealand, are up the top of the pyramid and we trust the agencies to carry out their legal mandates in such a way that we can defend not only in action but in remuneration. I hope that this bill shows that there’s a conjoining of all of us that the days of disproportionate appetites to what the role really is are coming to an end.

Now, I accept that the SSC has a view that the best thing to do is to appoint generalists and not appoint people that are technically proficient. I, personally, prefer an option where we encourage as many people that have technical proficiency to roles and teach them to be general managers, rather than get general managers and teach them to be technically proficient in what are demanding roles. But I’m a New Zealand First MP—I’m a long way from ever being the State Services Commissioner, and I gave up on that prospect at about the point I started to go to school. But whether they are technically adept at a certain area or whether they’re generally proficient, the time has come for us to empower Peter Hughes to ensure that their salary expectations and their remuneration packages don’t stray too far from what we put up with as parliamentarians and Ministers, and, if they don’t like it, then the sooner they go out in the private sector and try and earn a living there the better. Thank you very much.

Thank you, Madam Deputy Speaker. I am very concerned when a senior Government Minister takes this opportunity and this forum to display his attitude to the Public Service, which is, at best, punitive but also, by his actions in the past and no doubt in the future, could be described as displaying a witch-hunt mentality towards the Public Service.

The implied threat today in the House by Shane Jones, which was repeated several times, was that if Public Service chief executives don’t like the provisions in this bill, in that their pay and conditions will come under extra scrutiny, then, effectively: “If you don’t like it, get out.” That would be seen, at best, as being not helpful and, at worst, just unworthy of a Government. So we really do have to question whether this is a prevailing attitude of a New Zealand First Minister in this coalition Government and whether, due to the power balances—which are very much up in the air at the moment with this coalition Government about just who actually is in charge—this attitude of “If I don’t like you, I’m going after you.” is going to prevail over the next couple of years, or less, until we have another Government.

I also want to take issue with the Hon Shane Jones’ reference to a senior police officer’s appointment process, where he regrets, I think, in the tone of his voice, that the process has come under scrutiny, and where he contends that the Opposition have trivialised that appointment process. No, no, no, no, no. What this Opposition has done is question some of the behaviours that have happened and still happen within New Zealand Police—and I say this in the context of the Public Service appointments process, Madam Deputy Speaker.

What, in fact, the concern around police now is, 10 years after some appalling police conduct, where the Office of the Auditor-General had a programme of scrutiny over the police—and I was assured in select committee by the commissioner that no more police bullying was happening, particularly bullying of women. That remains a concern, and it remains a concern to me that a New Zealand First senior Minister, who seems to be grabbing power with every moment that goes, is defending the behaviour of another Minister in his party—Tracey Martin—who’s made a complete hash of the inquiry into a senior police officer.

So we support this bill—we do support this bill—because it does, in Part 1 of the bill, make amendments to the Crown Entities Act around the appointment of chief executives for statutory Crown entities. We wanted to go further in the bill, but what we want is the best person for the job, because it is an important job. Being a chief executive of a Crown entity carries an awful lot of responsibility. Take no notice of what Shane Jones says about putting a bit of un-monetised work into the job—of course they do. Of course they do. From time to time, chief executives come under an enormous amount of pressure, and it is a very bad situation when that pressure comes from their own Government. Thank you, Madam Deputy Speaker.

Thank you, Madam Deputy Speaker. I rise to take a brief call on behalf of the Green Party in the second reading of the State Sector and Crown Entities Reform Bill, and I’m going to do my best to restrict myself to the content of the bill rather than getting into any side discussions today.

This is a relatively simple bill that amends two key pieces of legislation, the State Sector Act and the Crown Entities Act. It’s not going to change the world, but it is an important signal to the country about some of the things that are important to this Government—namely, addressing inequality, trying to rebuild confidence in our public sector, and making more connection between the core State sector and our Public Service in the wider State sector, as well as ensuring that when there may be concerns and the need for an inquiry, it is able to happen smoothly and appropriately.

Within the bill, a key change to deliver on those goals is that there will be the change to the Crown Entities Act to require Crown entities to obtain written consent from the State Services Commission on the terms and conditions of the chief executives (CEs) when they’re employing them, and the reason for this is probably quite well-known to most New Zealanders. We’ve seen quite a few stories in the media about salaries that were perceived to be out of step with wage increases and salaries for the rest of the country, and they were going against the advice of the State Services Commissioner, indeed. So this is just ensuring that that actually can’t happen. We have a mechanism now in law to be able to keep that in step and the decisions and the guidance for the public sector CEs—the Crown entities can’t be out of step with that. I think that’s a really important signal. We do, as a country, absolutely want to ensure that people are properly rewarded for their work and that we’re able to get great people into these important positions, and we can do that without actually going a step too far in terms of increasing inequality.

The bill also sets those appointments for a period of five years, whereas at the moment the appointments are permanent. The reason for this—and when I first looked at this, I didn’t immediately understand why we would be doing that because, typically, when people apply for jobs, they’re permanent jobs, and we support that, but in this case, it’s when the boards who employ the CE turn over. They have a particular life, and when there’s a permanent appointment in the CE position, that ends up as having quite an imbalance of power. When you’ve got a new board and a board who’s turning over and who may reflect different political directions, to have one CE who has 10 years’ experience and knowledge of the organisation becomes quite imbalanced in terms of power, and it actually reduces, in effect, the role and the oversight of the board because of that imbalance of power. From my experiences as a worker working to a board, as well as having been on boards, I understood it in that sense. So we do support reducing the term of appointment to five years.

The other change is for the State Services Commissioner to set standards of integrity and conduct by applying a code of conduct. The intent of this, I think, is pretty obvious to everyone. It is to be able to help people have a sense of confidence. It is to have a joining together of our State sector in a uniform set of values, so that we can have confidence that everyone, no matter what their role is in our State sector, has that sense of commitment to the public and will be abiding by a code of conduct.

The bill also improves the investigation powers of the State Services Commissioner. In this area, in particular, there were quite a few changes made within the select committee, and I too would like to acknowledge the Governance and Administration Committee for the work that they’ve done on this bill. It does indeed seem to have strengthened it helpfully. I understand that quite a few of the amendments that were made by the select committee, at least in some part, stemmed from the submission from the Law Society, who detailed that the protections of the Inquiries Act should also apply in this area, and said we needed to make sure that there was more consistency between this piece of legislation and the Inquiries Act—which, of course, makes sense—and it is a testament to the value of the select committee process.

So aspects that have been added from the Inquiries Act through the select committee process are a duty to act independently, impartially, and fairly, the ability to designate core participants in the inquiry, and the ability to refer questions of law to the High Court when needed. Also, an amendment is being made to ensure that a delegation under the Inquiries Act must be carried out in accordance with the State Sector Act. That is building the consistency between the two pieces of legislation, which just seems terribly sensible to me. On that note, I commend this bill.

Thank you, Madam Deputy Speaker, for the opportunity to contribute on the State Sector and Crown Entities Reform Bill in its second reading. First of all, I would like to acknowledge the Hon Chris Hipkins for introducing this bill and, secondly, I would like to acknowledge Brett Hudson, the chair of the Governance and Administration Committee when we went through the process, for his leadership, and all the members who contributed during the select committee process.

This is an omnibus bill which makes amendments to the Crown Entities Act 2004 and the State Sector Act 1988 to provide for greater integrity and accountability in the management of the State sector services. It is important, as the previous speakers have acknowledged, that we have the best people to lead our Crown entities such as ACC and the Superannuation Fund, and we have to find a relevant person who can lead such an organisation, which deals with billions of dollars on behalf of the taxpayers and the Government. They need to have the best talent, and that is the foremost important criterion for the leadership at that stage, as Treasury cautioned that these Public Service agencies are large organisations and are competing against other private sector organisations for top-quality candidates. As we know, it is not only the monetary thing which attracts people to come and lead such an organisation, but there are people who are committed and who want to take these organisations to the next level, and we have seen in the past few years some of that leadership, which has taken those organisations which were performing badly to be the best at this time—for example, ACC.

The bill amends section 117 of the Crown Entities Act to require the board of statutory entities to obtain the written consent of the State Services Commissioner before finalising the terms and conditions of employment for chief executives and subsequent amendments to them. As we know, at present, most statutory entity boards are required to take consent from the commissioner and to have regard to the commissioner’s recommendation. So this bill emphasises that it is compulsory for all entities to get the consent from the State Services Commissioner so that it can be referred to in due course. We know that tertiary education institutions are already required to obtain such consent from the commissioner.

So I think it is a good bill and, with more minor amendments, it can deliver the best for the country. I commend this bill to the House.

This is a split call.

E Te Mana Whakawā, i tēnei wiki o tō tātou nei reo rangatira kei te mihi au ki a koe.

[Madam Deputy Speaker, greetings to you in this week of our esteemed language.]

For those that don’t perhaps live in the Wellington bubble, the name—

💬 Hon Chris Hipkins: What bubble?

—what bubble?—of the State Sector and Crown Entities Reform Bill might not come across to some as the most riveting and interesting of legislation. However, the State sector—for any ordinary layperson—effectively, is where the day-to-day interaction that most people will ever have with the Government happens, and, therefore, the way in which the State sector conducts itself and represents itself to the ordinary Jane and Joe Bloggs of our communities is inherently important. So the reforms that this omnibus bill seeks to undertake, under both the State Sector Act and the Crown Entities Act—and it’s good to hear that there is common agreement across the House—basically, are to ensure that there is transparency and that the public can trust what the State sector is doing on its behalf, and to make sure that it’s fit for a current and modern context.

There are really only a couple of things I want to speak to. Starting with the State Sector Act, the ability of the State Services Commissioner to undertake inquiries is probably one of the most important elements of the reforms that this bill will bring through. Look, the Commissions of Inquiry Act 1908 has been a very useful Act that the State Services Commissioner has had to operate under, but we know that it has been cumbersome, and we know that it has been challenging, particularly in recent times, to the ability of the commissioner to undertake relevant inquiries. So to bring it into alignment with the Inquiries Act 2013 is common-sense practice, and so on this side of the House, we do commend our Minister of State Services for bringing through those amendments.

Turning to the Crown Entities Act, this is probably some more of the values and principles alignments that I’m really pleased to see we’re bringing in through this piece of legislation. What we did see, and what we have seen—and I think both sides of the House had concerns about the way in which those in executive positions, particularly the CEO positions, were watching remuneration escalate into the six-digit figures, whereas the gap between the executive level and the ordinary worker was just becoming further and further apart. There were concerns expressed under the previous Government, and recommendations were made by Ministers to the relevant boards. Those recommendations—and this is particularly apparent in both ACC and the Superannuation Fund—weren’t taken up by those boards, and there was little, really, that could be done.

So by enacting the amendments in this bill to limit the remuneration, or at least to have the remuneration of the CEO position affirmed by the commissioner—and where there is a dispute, then the Minister will have to come in and work with the board to make the relevant amendments. I think that’s a prudent measure that will increase the public’s trust and confidence in the fact that the Minister will be a backstop in terms of making sure that there aren’t unbridled abilities by those boards to let that remuneration go out of control. And then, secondly, of course, is having that five-year term as a starting point for those in Crown entities. Of course, that’s renewable, so that’s good. That gives certainty to those who want to be involved on those Crown entities and on that board so that they can do the necessary planning, but the buck is that there must be that review at that five-year point.

So I think that the public can have trust and confidence in both the State services sector and the amendments that we are bringing through in terms of the Crown entities to make sure that they are controlled and that there are measures put in place. So, with those brief comments, we commend this bill to the House.

There’s a good argument here for having these sorts of bills reserved for late in the evening on Tuesdays and Wednesdays, to help cure the insomniacs that we have watching from out there in TV land. It’s a bit like watching paint dry or a calculus lecture, but it’s a necessary—[Interruption] I’m not criticising the last speaker, Kiri Allan, at all; I’m just saying this is what it’s about.

Essentially, it gives the State Services Commissioner powers to control the terms and conditions of CEOs. Currently, the commissioner doesn’t have to obtain consent, and this law changes that. It’s potentially a good law change, limiting Crown entities’ employment conditions contracts to five years—I would imagine that’s a pretty good law to bring in—with a right to renew, and setting standards of integrity and conduct for Crown entities boards is another good law.

National is supporting this bill. It’s essentially our bill. It aligns with the “National Inquiries Act”.

💬 Hon Members: Ha, ha!

Yeah, you like that? I’ve been, what, nearly a year in Parliament now, and we’ve been passing a lot of National Party bills in this first 12 months, so I’m looking forward to some really good legislation coming from the other side of the House—their own work. I’m really looking forward to the second and third years for that. But I am worried about the direction that public services are going in under this coalition Government—just to spark it up a bit.

💬 Jamie Strange: What about your own speeches?

The other side’s awake now. Less accountability—they’ve knocked Public Service targets on the head—especially, for example, waiting times in emergency departments, which were proven lifesavers. So it’s the direction this Government’s going in that I am concerned about.

We need to ensure that we are incentivising for performance. Now, I know Minister Hipkins is keen on dropping the measurement and setting performance standards—they’ve been doing that since they got in. Instead of pulling up the bottom rung of the ladder, they’re trying to take down the top. You’ve got to remember that these chief executives are responsible for investment and expenditure of billions of dollars. We need good, competent people fronting our organisations. Otherwise, we’ll get bosses like you see on the show Gliding On.

We have to compete with the private sector. I know the Institute of Directors states that this bill may undermine good governance, that appointing and managing CEOs is one of the most important functions of a board, and that it’s important that these functions are at arm’s length from the commissioner. Boards such as the Superannuation Fund—that chief executive heads a fund with $38 billion worth of assets under management. I would want the best person in charge of that show, wouldn’t you?

So we support this bill. We just have our concerns about the attitudes displayed by some of them across the House.

Tēnā koe, Madam Deputy Speaker. Kia ora. I rise to take a call at the second reading of the State Sector and Crown Entities Reform Bill. Previous speakers displayed their respective attitudes, as displayed by my learned colleague Matt King, but I’d like to follow my portfolio Minister, the Hon Chris Hipkins, in looking at some principal points under this bill.

Now, the title of this bill may sound a little bit arid, but if we put it into the context, it is much easier for us to get the real picture. For citizens, Crown entities and the State services sector, and so on and so forth, are often the face of the Government. Collectively, they carry out a wide range of functions, from running public hospitals to our schools and performing a broad range of service delivery and regulatory activities. So it is very important that they remain connected around core values based on a unifying spirit of service to the community. So it is a no-brainer for us to maintain the confidence and public trust in Crown entities and State services.

Some of the principal proposals in this bill include, firstly, the remuneration setting for Crown entity chief executives, and, secondly, five-year appointment terms. Previously, chief executives of Crown entities had to be appointed on an ongoing basis, which, in plain English, means permanently. This may have created some strange situations, because, largely, board members would be responsible for chief executives whom they did not appoint, and a chief executive’s terms of appointment would go beyond the terms of appointment of those board members.

Thirdly, in terms of standards of integrity and conduct for Crown entity board members, under the proposals of the bill we would be able to catch up to international practices such as the Code of Conduct for Board Members of Public Bodies issued by the UK Cabinet Office.

Last, but certainly not least, I mention the State Services Commissioner’s powers to investigate. There were different thresholds and powers applicable to different functions, but it is highly desirable to put in place a single investigation package that aligns with the Inquiries Act 2013.

Without affecting the autonomy of Crown entities’ statutory functions, the legislative changes in this bill support greater integrity and accountability in the management of State services. So this is a simple, narrow, but very important bill, and, without further ado, I commend this bill to the House.

I will take a brief call on this bill. This is actually a minor bill. It is not as important as it sounds, because much of what we are talking about has been applied to much of the State sector, so it is actually a minor bill. This bill actually empowers the State Services Commissioner to, basically, make sure that our Public Service has strong integrity and accountability. So this is the essence of this bill.

Openness is like a keyword in this bill. The current Government has been talking about openness, but this is actually what the Government is lacking.

What we should also pay attention to is the balance between strengthening the integrity, accountability, and openness of our Public Service sector, and the capability to attract competitive or capable leaders to our State sector. That is another point that we can consider.

Overall, this is a good bill, so we would like to commend this to the House. Thanks.

Kia ora. He mihi mahana ki Te Whare i Te Wiki o Te Reo Māori, tēnā koutou, tēnā koutou, tēnā tātou katoa.

[Warm greetings to the House in Māori Language Week, greetings, greetings, greetings to all.]

It’s a privilege to stand and speak on the State Sector and Crown Entities Reform Bill. As a member of the Governance and Administration Committee, it was also a really interesting process to hear the seven submissions from parts of Government. One submission in particular, which I’ll pay reference to, was from the Law Commission, which made a very valuable contribution. It opened my eyes to the value of having detailed scrutiny from outside entities looking at the legislation and providing improvements.

The improvements made to this bill have been done at the select committee level and that is really good to see. In terms of what Crown entities are, they very much provide a public face to the Government and they carry out a very wide range of functions. Because they are not part of the Public Service, it is also important that they should still remain aligned to the work that the Government does and remain consistent across those areas. That’s where this bill has helped to bring the pay range, in particular, of senior members from Crown entities into line with the rest of the State sector.

I think, in particular, that consistency is important for the appointment process of chief executives if we want to strengthen the public’s trust and confidence in the way that the Government does its business. When we look at Crown entities, it’s very important that they remain connected and aligned with the remainder of the State sector, and so this bill has set out to do that and has, indeed, done a good job.

The nub or the crux of where the discussion at select committee lay was in trying to get that balance right—trying to get that balance right between getting the right person for the job, the person that’s best suited for that chief executive role, but, at the same time, as this Government has made increasingly clear, not to pay excessive amounts to chief executives, which has been done in the past. In that it’s been an interesting discussion at select committee, acknowledging that part of being in the Public Service is that we have skilled and experienced people who serve in the Public Service. They are motivated by many things, and remuneration is just one of those many things in life that can motivate any individual.

So getting that balance right was an interesting discussion. I’d like to acknowledge the chairmanship of Brett Hudson of the select committee, for doing an excellent job of being able to ask good, thorough questions from those submitting groups, and to arrive at a good balance between those two areas of making sure there is the right person for the job but also making sure that we’re not paying excessive amounts to chief executives.

I would like to acknowledge the fact that the changes that this bill has done, in particular, have enabled the right balance to be struck to make sure that in those key areas—where we’ve seen change in terms of how those decisions are made and also how inquiries are carried out—a bill has been developed that strengthens the Public Service and gives the public greater trust and confidence that there is transparency in the way that Crown entities are run alongside other Public Service entities. I would like to acknowledge all those who submitted and all those public servants that spent many hours making these changes, and I commend this bill to the House.

Bill read a second time.